While Short Sales have become commonplace in the real estate market today, many people still are confused at what a short sale is and the process that is involved when selling or purchasing a “short sale” property.
Simply stated, “a short sale is a property that is being sold for less money than the amount that is owed on the mortgage or note.” Market conditions are such that despite the sellers best efforts to satisfy their loan, either the market value of the property has depreciated to such a point that it is no longer possible to sell the property at a price high enough to satisfy the loan, or the seller has had some major financial setback that no longer makes it possible to fulfill their loan obligation.
While there is some truth that short sales can take a prolonged period of time to close, and the process can be frustrating, the delays in the process can be closely tied to the seller’s lender’s negotiator and investor assigned to the file. What most people don’t understand is that there is more than one negotiator and one investor the bank uses when making determinations on whether to accept or reject an offer on their short sale assets and the “personality” and case load of the those individuals can either make the process move along quickly or exasperatingly slow.
What’s the difference between the list price of a short sale and a bank owned property?
Many times you will see a listing on the MLS (multiple listing service) that says something along the lines, “The list price may not be sufficient to pay all liens and encumbrances and requires approval by seller’s lender/third party final approval.” More often than not, the list price is a price established by the listing agent who feels they can substantiate the list price with comparable properties in the area, but keep in mind this is not a bank approved price. The disclaimer above is a public statement being made to let all interested parties know the list price may not be sufficient to satisfy all expenses or notes associated with the property and the list price may not be acceptable to the seller’s lender, who is making the final determination on whether an offer is going to be accepted or rejected.
Keep in mind, the bank may accept the offer, but if they impose a deficiency payment on the seller that is unacceptable to the seller, the seller may cancel the contract. The chance you take with a short sale is that it could take weeks or months to find out that your offer is not being accepted either due to the bank wanting a higher purchase price than what you have offered, or the repayment for the outstanding loan balance was unacceptable to the seller and the entire contract is being cancelled. With a bank owned property, the list price that is being publically displayed has been approved by the lending institution who now owns the property and typically within 48-72 hours you have an acceptance or rejection of your offer.
If you are interested in buying or selling a short sale property, feel free to contact us for an appointment so we can explain in greater detail the short sale process and the expectations you should have when buying or listing a short sale property.